Air Florida, Midway Deal Gets More Time

July 2, 1985|By Tom Stieghorst, Business Writer

Air Florida and Midway Airlines were given another two months to complete their proposed merger on Monday by federal bankruptcy Judge Sidney Weaver, who is overseeing Air Florida`s Chapter 11 bankruptcy proceeding.

The two airlines were supposed to have the $53 million acquisition done by Monday, but attorneys said they were unable to wrap up a financing agreement for the sale of three Air Florida 737 airplanes that are part of the deal.

In the past, Weaver has allowed the Air Florida-Midway negotiations to continue without a ``drop dead`` merger date, to the disappointment of various creditors. But when attorneys failed to reach an agreement Monday, Weaver ordered the merger finished by Aug. 27.

``It`s apparent to me that we have to set a deadline,`` Weaver said. He added he would consider the merger ``null and void`` if it isn`t concluded by that date.

Weaver approved a preliminary agreement last September. Since then, Chicago- based Midway has been flying some former Air Florida routes under the name Midway Express while negotiations continued. Air Florida filed its petition for Chapter 11 protection with the Miami court a year ago Wednesday.

In a separate matter, Weaver ordered the Internal Revenue Service to free $9.4 million in income and excise taxes that the airline paid in the three months before it filed for Chapter 11. The total includes nearly $800,000 of operating cash held by Air Florida that had been frozen while the airline`s suit against the IRS was decided.

Air Florida eventually must pay the taxes. But bankruptcy law allows it to stretch out repayment over a six-year period. John Olson, a lawyer representing Air Florida, said the refund will be used to help finance the company`s reorganization.

Holger Euringer, an IRS spokesman in Jacksonville, said he didn`t know when Air Florida could expect payment of the refund or whether the IRS would appeal.

In another matter, Weaver refused to block payment of a $100,000 fine imposed on Air Florida by a judge for its role in price fixing on routes to Central America in 1982 and 1983.

The fine would absorb about half of Air Florida`s unencumbered cash. Weaver referred Air Florida back to the trial judge in the price-fixing case, with the ``strong suggestion`` that the fine be delayed until after the closing of the Midway merger.